CAPITALAND COMMERCIAL TRUST
C61U.SI
CapitaLand Commercial Trust - Proactive leasing activities
- CCT saw higher income from most of its properties in 9M15.
- Rental reversion remained positive in 9M15, with new lease demand from the financial services, IT, media, telco and real estate sectors.
- Adopting proactive leasing strategy ahead of rising incoming supply; CapitaGreen’s committed occupancy rate stood at 87.7% at end-Sep.
- Among the lowest-geared S-REITS; Potential S$1.3bn debt headroom for purchases.
- Muted office sentiment likely priced in. Reiterate Add, with an unchanged DDM-based target price.
Higher rental income from most of its properties in 9M15
- For 9M15, CCT booked a 3.8% yoy increase in NPI due mainly to revenue growth from higher rents and occupancy rates across all its assets (with the exception of Twenty Anson).
- CCT’s portfolio achieved 96.4% occupancy rate in 9M15 versus CBD Core’s 95.8%. Its Grade A offices achieved 94.7% occupancy in 9M15, in line with the market’s 94.8%.
Reversions remain positive in 3Q15
- In 3Q15, CCT registered 226,000 sq ft of new and renewed space, of which 36% were new leases.
- Demand came largely from the financial services, IT, media and telcos and real estate sectors.
- Transacted rents ranged from S$9.30-12.30 psf/month for One George St, S$10.50-13.50 psf/month for 6 Battery Rd and S$11.90-14.00 psf/month for CapitaGreen.
- Overall, average portfolio rent inched up to S$8.89 psf/month.
- CapitaGreen, which opened on 9 Sep, achieved 87.7% committed occupancy rate.
Proactive leasing strategy
- CCT has proactively re-contracted expiring leases, including those due in FY16. To date, 2% of its office and retail leases are due to be renewed in FY15 and another 16% in FY16. This provides the trust with good earnings visibility.
- Average expiring rents in FY16 and FY17 range from S$9.69-10.26 psf/month. We expect the gap between market and reversion rents to narrow, as market rents continue to slide over the next two years due to above-average new supply.
Healthy balance sheet with low gearing
- CCT has one of the lowest leverage ratios among the S-REITs, with net gearing of 30.1% at end-Sep. This gives it huge debt headroom of c.S$1.3bn (before hitting the 40% net gearing ratio) for future acquisitions.
- It has a call option to acquire the remaining 60% of CapitaGreen from its JV partners, within three years after completion in 2015. This option could provide an avenue for inorganic growth.
Muted office sentiment priced in
- CCT currently trades at 0.74x FY15 P/BV and offers investors potential FY16 DPU yield of 7.1%.
- We think that much of the muted sentiment in the office sector has been priced in.
- We maintain our Add call, with an unchanged DDM-based target price of S$1.65.
LOCK Mun Yee
CIMB Securities
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http://research.itradecimb.com/
2015-12-09
CIMB Securities
SGX Stock
Analyst Report
1.65
Same
1.65
